The Labour Court has recommended an 8.25pc pay rise over three years, or 2.75pc a year, to January 2018 in a decision just issued.

And it says each grade of staff should enter talks with Dublin Bus with a view to increasing their pay further in return for productivity measures.

But the two main unions at the state-owned company, SIPTU and the NBRU, have warned that industrial action may be imminent as the pay rise is far short of expectations. The NBRU sought a pay hike of 31pc to take account or a pay rise recently awarded to Luas drivers and an increase under a previous social partnership deal that was not paid.

SIPTU Organiser John Murphy said is a "strong possibility" of industrial action if Dublin Bus does not make a better offer as the proposed pay hike is likely to be rejected by his members.

And the General Secretary of the National Bus and Railworkers Union, Dermot O'Leary, said he could not rule out "the spectre of industrial action".

Mr O'Leary said his 1,450 members are unlikely to be happy with the award as they had sought a similar increase to Luas drivers, which was worth almost 4pc a year.

The unions will now ballot their members on the recommendation.

“Given the eight year hiatus since bus workers last pay increase and pay cuts that were foisted on staff in the intervening period, it is disappointing that the court has apparently decided not to follow its own guide in not awarding a similar increase of at least 3.8pc per year which it awarded to others in the same transport sector as recently as last month in settling the Transdev dispute," said Mr O'Leary.

"We went on record in advance of the resolution of the Luas dispute indicating quite clearly that we would expect similar treatment with regards to bus and rail workers.

"We also said that we required the pay gap between bus and tram drivers to be addressed as a component of our members' pay claim.

"We cannot rule out the spectre of industrial action in the coming weeks and months should they reject this recommendation".

The recommendation, signed off by Deputy Chairman Brendan Hayes yesterday, says the pay deal should be backdated to January 1 this year and expire on December 31 2018.

Pay increases of 2.75pc should be given on January 1 each year from this year to 2018.

It says the pay rises reflect "the acknowledged contribution of the workers, by way of cost-saving measures to the company's recent recovery".

The recommendation says the company is emerging from a deep recession during which the number of workers was cut, wages were "suppressed" and productivity increased significantly to ensure the survival of the business.

But it said passenger numbers are increasing after a period of continual decline and fares had gone up, boosting company revenue. It says this recovery is in its infancy and must be allowed to develop further before the company could support significant wage increases.

Mr Hayes says that the parties should meet in the second half of 2018 to agree a new pay framework following the expiry of the agreement.